Hong Kong Exchanges and Clearing Limited (HKEX) is considering opening offices in New York and London to be closer to companies and investors in North America and Europe, in its drive to become a worldwide marketplace for financial products.

The exchange that was established through a merger 22 years ago this month, said in May that it was planning for offices in North America and Europe. Several sources familiar with the matter narrowed the options down to New York and London, pending final decisions.

"We want to be more client-centric, so we want to be closer to our clients, and that is very, very important," the exchange's CEO Nicolas Aguzin said in an interview with South China Morning Post, confirming plans for a New York office but said there was no final decision yet on the location of its first European office.

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For the longer term, Aguzin said his dream was to have "have multiple offices, not only in Europe, but also in the Middle East, and Latin America as well. The purpose is to make sure that Hong Kong is an international centre to attract investors from all over the world."

Aguzin said London was a "natural choice" in Europe, especially since it is the home of the London Metal Exchange (LME), which the HKEX bought in 2012 for £1.39 billion (US$1.71 billion/).

"It makes a lot of sense to be in London [because] we already have physical presence in London with the LME," he said. "However, we want to assess what the alternatives are. How can we leverage all the different investors that are in Europe?"

Nicolas Aguzin, chief executive of Hong Kong Exchanges and Clearing Limited (HKEX), during an interview with SCMP in Causeway Bay on 17 June 2022. Photo: Jelly Tse alt=Nicolas Aguzin, chief executive of Hong Kong Exchanges and Clearing Limited (HKEX), during an interview with SCMP in Causeway Bay on 17 June 2022. Photo: Jelly Tse>

HKEX, the world's fourth-largest financial exchange by value, already has offices in Singapore, Beijing and Shanghai. The expansion to North America and Europe underscores its search for diversification and growth, as it continues to serve as the landing pad for mainland China's start-ups and companies.

A global presence makes sense for the HKEX, which counts 43 per cent of investors who trade Hong Kong-listed stocks as being international, based outside the city.

"We're going to be in New York, that is going to be one of the offices. In Europe, we're still defining where we're going to have our office," said Aguzin, who left his previous job as JPMorgan Chase's international private banking chief executive last year to become the first foreigner to head the HKEX. "It has not been finalised. But definitely what we want to do is to be in a place where we're very close to the main investors."

As many as 1,370 China-domiciled companies are listed in Hong Kong, making up 44 per cent of all listings and 78 per cent of the exchange's capitalisation. In contrast, 158 companies based in Europe, North America or Southeast Asia are listed in the city, making up a mere 5.1 per cent of the total, according to HKEX data.

That is a situation the HKEX wants to change. "We do not want to be [merely] a fundraising hub looking for international capital for Chinese companies," Aguzzin said. "We want to be much more than that. We want to provide to international companies the ability to come to raise money and [elevate]their profile."

Several European cities including Frankfurt and Amsterdam are jostling to offer to host the HKEX, as they believe that post-Brexit London is no longer the gateway to continental Europe, according to a source familiar with the matter. Several European companies such as the Italian fashion designer Prada and the French skincare company L'Occitane are listed in Hong Kong.

The choice of New York is more obvious for the HKEX, as it takes the fight for the global fundraising crown in initial public offerings (IPOs) to the home turf of the New York Stock Exchange (NYSE). The HKEX was the world's top IPO destination in seven of the past 13 years.

The HKEX is seeking to offer itself as an alternative listing destination for the China-domiciled companies on American exchanges, amid rising US-China tension and a campaign by some US lawmakers to expel them.

As many as 261 Chinese companies including this newspaper's owner Alibaba Group Holding were listed in the US, valued at a combined US$2.1 trillion as of March 31, according to data compiled by the US-China Economic and Security Review Commission.

Most, if not all, of these companies face the risk of being expelled from US exchanges under the Holding Foreign Companies Accountable Act (HFCAA) starting in late 2023, over a long-standing dispute in auditing standards.

Alibaba, Baidu, NetEase, JD.com, Xpeng and dozens of US-listed companies have already raised capital in Hong Kong either through secondary listings or dual primary listings since US lawmakers began erecting barriers on Wall Street under the former Trump administration.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

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